U.S. equity markets continued their volatile upward trend during the third quarter, trading on Federal Reserve comments about the tapering of its quantitative easing program, concerns about a slowdown in China, and better-than-expected second-quarter earnings. The S&P 500® was down in August after a strong July. In September, the Index rebounded to a record high on the same day the Fed announced it wasnt tapering and would continue its $85 billion monthly purchases of U.S. Treasuries and mortgage-backed securities. This news sent the equity and bond markets higher. The Fed also indicated economic activity expanded at a moderate pace, labor markets improved and household spending increased. Following the Fed-inspired rally, stocks pulled back in the final days of the quarter, as Congressional bickering about the federal budget suggested a government shutdown would ensue.
The Fund posted a total return of 4.90% for the quarter, compared with 5.24% for the Funds benchmark, the S&P 500® Index. Stock selection within the information technology, energy and healthcare sectors detracted from performance. On the other hand, the change in market leadership benefited the Funds performance, aided primarily by stock selection in the industrials and consumer staples sectors. Stock selection in the financials sector also lifted relative results.
Market volatility likely will continue into the fourth quarter, driven by macroeconomic data and Fed statements. We believe the outlook for risk-taking will continue to improve, as better economic data is released. We believe the Fund is well-positioned as investors move beyond the broad economic data and refocus their attention on company fundamentals.
If you're seeking a low cost, disciplined approach to investing in equities, this fund may be appropriate for you. It seeks long term growth of capital and dividend income and invests primarily in a broadly diversified portfolio of established, large-cap companies. The Fund is intended for use as a core equity investment.
- Use a multi-factor proprietary quantitative stock selection model with the goal of providing additional total return versus the S&P 500® Index.
- Create a portfolio with risk, style, capitalization and characteristics similar to the S&P 500® Index while potentially providing excess returns by overweighting or underweighting stocks that have the potential to achieve the Fund's objective.
- Sell securities when they are no longer attractive based upon evaluation criteria, such as valuation, price momentum and earnings quality.